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Traders Proverbs: These sayings carry important l

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Post# of 27267
(Total Views: 203)
Posted On: 08/28/2019 8:09:37 AM
Posted By: dw
Traders Proverbs:
These sayings carry important lessons about the markets.

Many trading advice expressions have been coined to describe the dynamics of the stock market. These adages remind us to avoid traps and seize opportunities. Here are some of the most common ones that reflect important insights about the markets.

The trend is your friend:

Some traders believe they need to behave differently in order to make smart investment decisions. The challenge is that the trend is reality. It represents the collective actions of all market participants.

When the broad market is trending higher or lower, so are most of the stocks in it. Rather than bucking the trend, acknowledge the direction of the overall market and plan your trades accordingly.

Don't try to catch a falling knife:

This saying applies to buying a stock that is falling sharply. Just as it is dangerous to try and catch a knife falling to the floor, it can be just as risky to buy during an aggressive sell-off. If your analysis indicates that now is a good time to buy it, act accordingly. But, don't buy just because it is "on sale." We've all seen that item in the store that is marked down 10 percent and three weeks later is marked down 25 percent or more. Purchasing these "sale" items early on can put a dent in your trading account.

Buy the rumor and sell the news:

This adage reminds us that rumors can drive a rally or a sell-off in a stock. People speculate on the impact of a rumor, and this speculation gets baked into the stock's price. If the rumor is proven to be true, then the impact might already be reflected in the price. If the rumor isn't true, then the stock is still likely affected. In short, remember that stocks often move on speculation and then adjust when the news is official.

Be fearful when others are greedy and greedy only when others are fearful:

There are long-term uptrends and downtrends but at a certain point the market pendulum will change direction. Timing is difficult but it is worth noticing when a company can seemingly do no wrong or do nothing right. During these times, think like a contrarian and don't become complacent.


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